Analyst Picks and Pans

Picks of the Week: Google, Cisco, Alcoa, AT&T

October 09, 2009

Highlights of analyst stock opinions issued the week of Oct. 5-9:

Oct. 9

Google (GOOG)

Credit Suisse keeps outperform; raises price target

Credit Suisse analyst Spencer Wang sharply raised his share price target on Google on Oct. 9, just two days after the online search leader's CEO Eric Schmidt said an economic recovery is under way in the U.S. and Europe.

Wang boosted his price target to $600 from $475. The new target implies the stock has room to rise 17% over the next year. Google's shares last crossed $600 in May 2008. Wang said online search will be "one of the first advertising mediums to benefit from an advertising recovery."

AT&T (T)

S&P Equity Research reiterates strong buy; lowers estimates

S&P equity analyst Todd Rosenbluth said on Oct. 9 that ahead of the expected release of AT&T's third-quarter results on Oct. 22, he was modestly lowering his 2009 and 2010 earnings per share (EPS) estimates. Rosenbluth cut his 2009 EPS forecast by 6 cents to $2.12 and his 2010 estimate by 7 cents to $2.28.

However, he still sees AT&T's earnings prospects and balance sheet as relatively strong and views its dividend, yielding an above-average 6%, as stable. He maintained his 12-month price target of $31.

Oct. 8

Alcoa (AA)

Citigroup maintains buy; raises estimates, price target

Citigroup analyst Brian Yu said on Oct. 8 that Alcoa's third-quarter operating earnings of 4 cents per share, reported after the close of trading Oct. 7, topped both his 10 cents loss per share estimate and the 9 cents loss per share consensus forecast of Wall Street analysts.

Yu continues to anticipate a profit in the fourth quarter as better third-quarter aluminum pricing flows to the company's Alumina business, and cost-cut initiatives advance. He raised his 2010 earnings estimate from 24 cents per share to 48 cents, and his 2011 earnings view from 60 cents to 80 cents. He boosted his $14 price target to $17.

Predicting an earnings recovery in the second half of next year and following an upbeat analyst meeting, Robert W. Baird analyst Steven M. Ashley upgraded Adobe Systems on Oct. 8 and boosted his target price on Adobe's shares to $40 from $35. He expects the software maker's earnings to recover thanks to the release of Creative Suite 5 next year.

Ashley also expects Adobe's acquisition of Omniture Inc. to close as expected and provide a longtime benefit to the San Jose, Calif.-based company.

Oct. 7

Cisco Systems (CSCO)

William Blair upgrades to outperform from market perform

Cisco Systems is winning new deals and benefiting from a broad economic recovery, William Blair analyst Jason Ader said Oct. 7 as he upgraded the company's stock.

"Our analysis suggests that there has been significant pent-up demand building over the last year for Cisco's products ... which has started to loosen up over the past few months," Ader told investors in a note. He also praised Cisco's recently announced plan to acquire Norway's Tandberg ASA for $3 billion, a move he said will help the company make video communication "ubiquitous" in the business market.

"Last quarter, the company noted that commercial passenger, regional/business travel and cargo markets were still challenging but that its aftermarket business appeared to be stabilizing and incremental end-market data appears to be supporting this as well," he wrote in a client note. "Also, while we are not free and clear from the economic recession's impact on commercial aerospace, signs of a modest recovery in 2010 travel seem to be improving."
Oct. 6

Family Dollar Stores (FDO)

BMO Capital Markets upgrades to outperform from market perform

BMO Capital Markets analyst Wayne Hood lifted his rating on Family Dollar Stores Inc. on Oct. 6, noting the stock had lost 14% of its value since early July. Hood said the stock now represents a good buying opportunity. "The stock is as cheap as it's been in years," he wrote in a client note.

"We believe investors are presently struggling to find new ideas with reasonable (stock prices), above average returns on capital, strong free cash flow yield and good long-term growth prospects. We see all of these in Family Dollar," he wrote.

Cirrus Logic (CRUS)

Needham & Co. rates buy; raises estimates, price target

Needham analyst Vernon Essi, Jr., said on Oct. 6 that Cirrus preannounced second-quarter revenues of about $55.7 million, 11% above the midpoint of its prior guidance range; augmenting the upside is that gross margin will be at higher end of its prior 50%-52% guidance range, implying the company can maintain margins against a shift in its business mix toward what's being perceived as lower-margin portable audio business.

The analyst notes the company's audio business is benefiting from a revenue ramp-up in key smartphone programs, as well as continued penetration within a legacy portable audio customer. He raised his fiscal 2010 (ending March) earnings estimate from 22 cents per share to 28 cents, and his $8 price target to $9.

Oct. 5

Manitowoc Co. (MTW)

Deutsche Bank upgrades to buy from hold

Deutsche Bank analyst Nigel Coe upgraded heavy equipment maker Manitowoc Co. late Oct. 4 on the strength of its foodservice equipment business. Manitowoc's foodservice division is "likely to dominate" over the next year or two, accounting for about 45 percent of revenue and two-thirds of earnings before income taxes, depreciation and amortization in 2010, Coe said in a client note.

"While the convenience restaurant and lodging segments have not been immune through this downturn, with revenues down low single-digit and margins expanding next year ... we see Manitowoc's foodservice segment as a critical earnings anchor," Coe said.

DTS Inc. (DTSI)

Deutsche Bank upgrades to buy from hold; raises price target

DTS Inc. is set for a period of "hyper-growth," Deutsche Bank analyst Brian Thackray said Oct. 5, pointing out improving demand for Blu-ray DVD players. Thackray said his checks with more than 500 retailers show Blu-ray technology is finally catching on as prices come down, a trend likely to boost sales for DTS. The Agoura Hills, Calif., company makes equipment for audio systems used in DVD players, computers and other electronics.

In addition to upgrading the shares, Thackray raised his price target to $32 from $28.